Stock Name: PANTECH
Company Name: PANTECH GROUP HOLDINGS BHD
Research House: OSK
Pantech Group Holdings Bhd
(April 27, 92.5 sen)
Maintain neutral at 93 sen, target price of 88 sen: Pantech's results for the financial year ended Feb 28, 2010 (FY10) were within our expectation but 17.5% below consensus.
Its bottom line (net profit) was well in line with our full-year forecast of RM50.7 million but was 17.5% below consensus estimates.
Its 4QFY10 revenue of RM66.5 million was 27.9% lower than that in the previous quarter while net profit was down 12.4% quarter-on-quarter (q-o-q), mainly due to a 26.3% dive in trading of pipe, fittings and flow controls (PFF) but this was partly cushioned by improved sales from the manufacturing division (28.5% growth q-o-q).
Although year-on-year (y-o-y) earnings fell 18%, the expansion in Ebit (earnings before interest and tax) margins from 16.6% to 18.6% could be due to the timing mismatch in steel prices, which were suppressed in 2009, and the dim outlook for the oil and gas sector last year.
However, we see brighter quarters ahead and expect demand for Pantech's manufactured products to recover gradually as stockists start to replenish stocks given the better steel prices as well as brighter outlook in crude oil prices.
We saw the manufacturing division consistently outperform its trading division over the past two quarters with strong double-digit growth q-o-q. Nonetheless, the more favourable raw material cost also helped expand margins at the trading division, which saw pre-tax profit margins go up from 20.6% to 22.7%.
Meanwhile, with crude oil price gradually moving up and trading above US$75 (RM239.25) per barrel, we believe that new exploration jobs will slowly come back and flow to Pantech's trading division as it is a leading oil and gas pipe supplier in the region.
Pantech has declared a final single-tier dividend of 1.2 sen, for a total dividend of 4.2 sen per share. This translates into a dividend yield of 4.5%. We believe the company would continue to maintain this quantum of dividend in the future as it has pared down its debts and brought down its net gearing of 0.62 times last year to 0.25 times as at FY10.
We maintain our FY11 forecasts and retain our previous target price of 88 sen per share based on six times price to earnings ratio FY11. We also maintain our neutral recommendation. - OSK Research, April 27
This article appeared in The Edge Financial Daily, April 27, 2010.
Company Name: PANTECH GROUP HOLDINGS BHD
Research House: OSK
Pantech Group Holdings Bhd
(April 27, 92.5 sen)
Maintain neutral at 93 sen, target price of 88 sen: Pantech's results for the financial year ended Feb 28, 2010 (FY10) were within our expectation but 17.5% below consensus.
Its bottom line (net profit) was well in line with our full-year forecast of RM50.7 million but was 17.5% below consensus estimates.
Its 4QFY10 revenue of RM66.5 million was 27.9% lower than that in the previous quarter while net profit was down 12.4% quarter-on-quarter (q-o-q), mainly due to a 26.3% dive in trading of pipe, fittings and flow controls (PFF) but this was partly cushioned by improved sales from the manufacturing division (28.5% growth q-o-q).
Although year-on-year (y-o-y) earnings fell 18%, the expansion in Ebit (earnings before interest and tax) margins from 16.6% to 18.6% could be due to the timing mismatch in steel prices, which were suppressed in 2009, and the dim outlook for the oil and gas sector last year.
However, we see brighter quarters ahead and expect demand for Pantech's manufactured products to recover gradually as stockists start to replenish stocks given the better steel prices as well as brighter outlook in crude oil prices.
We saw the manufacturing division consistently outperform its trading division over the past two quarters with strong double-digit growth q-o-q. Nonetheless, the more favourable raw material cost also helped expand margins at the trading division, which saw pre-tax profit margins go up from 20.6% to 22.7%.
Meanwhile, with crude oil price gradually moving up and trading above US$75 (RM239.25) per barrel, we believe that new exploration jobs will slowly come back and flow to Pantech's trading division as it is a leading oil and gas pipe supplier in the region.
Pantech has declared a final single-tier dividend of 1.2 sen, for a total dividend of 4.2 sen per share. This translates into a dividend yield of 4.5%. We believe the company would continue to maintain this quantum of dividend in the future as it has pared down its debts and brought down its net gearing of 0.62 times last year to 0.25 times as at FY10.
We maintain our FY11 forecasts and retain our previous target price of 88 sen per share based on six times price to earnings ratio FY11. We also maintain our neutral recommendation. - OSK Research, April 27
This article appeared in The Edge Financial Daily, April 27, 2010.
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